Over 200 Employers Named and Shamed for not paying staff the National Minimum Wage

What do major High Street retailers, recruitment businesses, construction companies, restaurants, hotels, schools, holiday parks, taxi companies, football clubs and pre-school nurseries have in common? They are just some of the 202 companies who have been named and shamed by Government for previously failing to pay employees the National Minimum Wage (NMW).

In total these employers owed their employees almost £5 million leaving around 63,000 workers out of pocket. Some of the most notable employers named include WH Smith, who failed to pay £1,017,693.36 to 17,000 workers, Lloyds Pharmacy, where 8,000 employees were underpaid by £903,307, and Marks and Spencer who failed to pay 5,000 workers £578,390.79. These findings were based on investigations which took place between 2017 and 2019 and we understand all the companies on the list have repaid the money owed.

The employers named today previously underpaid workers in the following ways:

• 39% of employers deducted pay from workers’ wages
• 39% of employers failed to pay workers correctly for their working time
• 21% of employers paid the incorrect apprenticeship rate

In many cases, the companies may not have intentionally underpaid their workers but NMW legislation is complex and it is easy to fall foul of the law. In WH Smith’s case, for example, it said it had misinterpreted rules around uniforms after it asked staff to wear particular coloured clothing without reimbursing them for it. Whilst M&S has confirmed its minimum hourly pay has never been below the NMW, it breached NMW rules as it delayed making payments to temporary staff. Whether technical breaches or not, companies are still exposed to serious liabilities in the event of NMW breach.

Potential sanctions

In the event of a breach of NMW legislation, HMRC can take the following action:

• Issue a notice to pay the money owed, going back a maximum of 6 years
• Issue a fine of up to £20,000 and a minimum of £100 for each employee or worker affected
• Initiate legal action including criminal legal proceedings
• Pass on the names of businesses and employers to the Department for Business and Trade (DBT) who may put them on a public list

The importance of getting it right

A review of the sanctions above highlights that getting it wrong can have a significant impact on a business and can lead to criminal prosecutions in the most serious case where breaches are not rectified. Even if HMRC has not identified NMW breaches, this can still be a significant issue for companies. For example, if it is going through a due diligence process as part of a business sale or corporate acquisition this can lead to delays while the issue is resolved, indemnification from the current owners and purchase price reductions. If you are preparing your business for sale, we would recommend checking whether your Company complies with the NMW requirements as part of your pre-sale strategy.

Every employer should therefore review its policies and processes to ensure that staff are paid correctly in accordance with NMW legislation. This is a complex area so please get in touch with our employment team if you need advice about any NMW issues.